Pentagon report expressed continued U.S. concern over China role in South China Sea where smaller neighbors have competing resource claims

WASHINGTON—China’s construction of a military base in Djibouti, closely watched by the U.S., may be a precursor to other projects outside of its neighborhood, such as in Pakistan, according to a new Pentagon report on China’s military.

The annual report, required by Congress, has focused in past years on China’s military operations in the South China Sea, where it has been building artificial islands and developing other land...